Who Controls Your Property

When You Can't?

Where do living trusts fit in?

Many estate planning mistakes arise from the fact that clients don't see how different people can gain control of their assets. Although California law is riddled with exceptions, my clients find that this chart helps them understand the big picture. Generally, people higher on the chart take precedence over people lower on the chart in gaining control of your assets. For instance, if you name one of your three children as the beneficiary of your 401k plan, your other two children are probably out of luck regardless what your will says because a will is a creature of state law which is overridden by federal law regarding ERISA plans. The most common mistakes I see in estate planning are in beneficiary designations and property titling. When assets are improperly titled, your will and trust will be ignored with respect to those assets.

Where does a living trust fit into this chart? It can fit in at several levels. Working from the top of the chart, you could name your trust as the beneficiary of your retirement plan (which is generally not a good idea), you could use the trust to manage community property, you most likely should transfer property titles to your trust, you can execute a pour-over will to move stray property into your trust after your death, and you can petition a judge to transfer property to a trust.

A trust is essentially a property management agreement. Once your stuff is in your trust, your appointed trustee manages and distributes your stuff in accordance with your written instructions. Much of my estate planning work involves getting your stuff into your trust and writing instructions that allow you to control and distribute your stuff without the expense, delay, and publicity of probate court supervision.